It is clear that the fall in oil prices has the potential to affect GCC economies significantly. Even the most diversified countries in the region still rely heavily on oil revenues as a source of public funds – the UAE has gone the farthest towards diversification, yet Dh6 out of every Dh10 received goes to fund public wages and benefits.

But the correction in prices should not come as a surprise. While it is partly the result of reduced demand, thanks to economic doldrums in some traditional markets, it is also partly down to increased supply and it will take some time for this new supply to dissipate.

It is true that in the past the performance of capital markets in the Middle East and North Africa was closely correlated to oil prices, and indeed GCC financial markets were highly affected following Opec’s decision last November to maintain its oil market share, rather than propping up prices.

In Saudi Arabia, for example, the petrochemical market is closely linked to the financial markets, so the fall in oil prices was always going to have significant knock-on effects. And, indeed, liquidity across the GCC is down by some 50 per cent, despite positive forecasts for this year.

However, there is no cause for doom and gloom. Firstly, while there may be some short- and medium-term price adjustments in the oil market, it is worth examining the background to this, and what it might mean for the future.

While the drop has been partly down to oversupply and reduced demand, especially from an economically slowing China, it is important to recognise the role played by geopolitics. Countries like Russia and Iran appear to have built their budgets on the back of $100 (Dh367) a barrel oil price and it might suit some of their rivals to allow prices to drop to a stage that increases the pressure on those governments.

Nascent parts of the oil industry – notably shale oil and fracking – have also been driven by the spike in oil prices that made them not only economically viable but positively attractive; it is perhaps no surprise that traditional oil exporters might choose, if they can, to absorb some short term pain in order to maintain their market dominance.

Heavy oil project

If this be the case, then the decision to protect market share is likely to bear fruit over the longer term. There are already signs that the market will return – Petrofac being awarded a $4 billion heavy oil project in Kuwait augurs well for the future, and suggests that more farsighted investors are confident about longer term prospects.

Secondly, the direct correlation between oil prices and capital markets was broken in 2012 –in the UAE, for example, there has even been evidence of a negative relationship. The fact is that the main interest for investors in the Middle East is no longer just oil prices, but also the ability – and willingness – of GCC governments to spend.

Government spending is currently high in the GCC, and looks set to continue for the foreseeable future. Governments know that economic diversification is key to on-going prosperity, and whilst oil is still the largest driver of revenue, it is by no means the only game in town.

So what does this mean for capital markets? There are a number of sectors that still look attractive beyond oil such as petrochemicals, renewable energy, trading, light manufacturing, and aviation and logistics. While it is true that the IPOs that have happened since the fall in oil prices have come in below the expected price – showing that the market is hesitant at the moment – the fact is that investors will still go for an IPO in more challenging market conditions, if the price is reasonable.

The fourth quarter of 2014 still saw $7.3 billion raised in the GCC, well above the $179 million raised in the same quarter of 2013. PwC is predicting a flurry of activity in the IPO market across 2015 in the region, especially in Saudi Arabia and the UAE.

The message for markets and investors is clear - even in the face of the downward spiral of oil prices, hold your nerve.

The writer is head of ICAEW’s Corporate Finance Faculty.